Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  A Check Up On Health Care
Posted Under: Sectors
Supporting Image for Blog Post

 

View from the Observation Deck

Today's blog post focuses on the health care sector and shows its total returns over two distinct time frames: year-to-date (YTD) through 6/20/23 and over the trailing 10-year period ended on 6/20/23. For comparative purposes, we have included the return on the S&P 500 Index to reflect the broader market.

  • Year-to-date through 6/20/23, the total returns posted by the S&P 500 Health Care Index and its subsectors are significantly lower than their 10-year averages through the same date. 

Four of the six health care related sectors/subsectors represented in today’s chart experienced total returns above those of the S&P 500 Index over the 10-year period ended 6/20/23. For comparison, we observe that the YTD total returns for each of those same data points are well-below those of the broader index. In our estimation, this could represent an attractive entry point. Over the 10-year period ended 6/20/23, the S&P 500 Health Care Sector’s 12.83% average annual total return was the third highest of the 11 major sectors that comprise the S&P 500 Index, behind the S&P 500 Consumer Discretionary and S&P 500 Information Technology sectors, which registered average annual total returns of 13.02% and 21.57%, respectively (not in chart).

  • As of 6/21/23, the S&P 500 Health Care index carried a current Price to Earnings (P/E) ratio of 16.73. For comparison, its 10-year average P/E ratio ended on the same date stood at 20.56.
  • The expected revenue growth for the S&P 500 Health Care Index stood at 3.9% on 6/16/23, more than double that of the broader S&P 500 Index, which has an estimated revenue growth of 1.85%, according to data from Bloomberg. 
  • The S&P 500 Health Care Index carried a weighting of 13.56% in the S&P 500 Index, the second highest behind the 28.05% weighting in Information Technology.
  • The U.S. Census Bureau reported that there were 55.8 million people aged 65 or older living in the U.S. as of the 2020 census, up 38.6% from 40.3 million in 2010.

Takeaway: A recent study by Fidelity Investments revealed that a 65-year-old couple retiring in 2023 can expect to spend an average of $315,000 on health care expenses through retirement, and the figure is expected to rise. The Centers for Medicare and Medicaid Services project that national health care expenditures will grow by 5.4% per year on average through 2031. From our vantage point, the YTD total returns reflected in today’s chart could represent an attractive entry point for investors willing to take a long-term view with regards to the sector. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions, or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Health Care Index and the S&P subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

Download a PDF of this post, please click here.

Posted on Thursday, June 22, 2023 @ 3:22 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
Sector Performance Via Market Cap
Worst-Performing S&P 500 Index Subsectors YTD (Thru 6/13)
Top-Performing S&P 500 Index Subsectors YTD (Thru 6/9)
Global Equity Returns Spanning The COVID-19 Pandemic
An Update On Energy-Related Stocks
Global Government Bond Yields
Real Rate Of The 10-Year Treasury Note
International Revenues By Sector
Recession? Don’t Ask The Equity Markets…
What’s Going On With the Dollar?
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.